Massachusetts Appeals Court Limits Definition of “Service Charge” Under Old Tip Statute

During the last five years, almost 30 purported class action lawsuits have been brought against Massachusetts businesses arising from their practices in distributing tips and services charges collected from customers. Most of these cases have occurred in the hospitality industry and involve claims by service employees under Massachusetts General Laws c. 149, § 152A (the “Tip Statute”), which governs the distributions of tips and service charges. Last week, the Massachusetts Appeals Court issued the first appellate decision to consider the definition of “service charge” under the statute that was in effect prior to September 2004 (the “old Tip Statute”).